MONTHLY ALCO PACKAGE SUMMARY

MONTHLY ALCO PACKAGE
August 2010

www.pcbb.com www.bancinvestment.com

BANK ACTIVITY
Economic and Banking Summary

July and its summer heat took toll on all of us in one form or another. Despite the typical summer
doldrums brought on by burnout and vacations, the month was a sizzler on a number of fronts.

Using equities as a backdrop, both the S&P and Dow rounded out the month with modest gains.
Dow up 8.05% and S&P up 7.73%. As for fixed income, the flight to quality remains strong as
economic outlook encourages low risk investments. 2Y Treasury touched a record low 0.565%
late in July. Mortgage rates continued their descent, and jumbos broke the 5% barrier for the first
time this year. In the last 6 weeks and on 5 separate occasions, mortgage rates continue to make
home buying and refinancing the most attractive in decades.

GDP continues to grow and posted a 2.4% for the month. However, the momentum of growth has
slowed to its slowest pace in almost a year. Consumer sentiment beat market expectations and
had an upwards revision to 67.8% in the latter end of July. In contrast, consumer confidence fell
by 3.9 points to 50.4% (slightly more than expected).

The big news of the month was the passing of the Dodd-Frank Wall Street Reform and
Consumer Protection Act. This is the most sweeping banking legislation since Great Depression,
as it covers 16 chapters, 2000+ pages and 243 rules. To put this in perspective, GLBA was only
145 pages and SOX was only 61 pages. Now, some 67 1x reports to Congress are due (including
Chinese drywall, mine safety and exploitation of Congo’s mineral deposits) in addition to the 22
ongoing reports that are required from regulators and legislative bodies. While the real impact will
not be know for the next 1-2Y as the regulators write the rules, so far community banks can
expect an increase in FDIC assessments, higher capital levels (such as 8% leverage ratio and
12% Tier-1 requirements), greater consumer compliance effort, more shareholder activism (for
public banks) and more restrictions to holding company operations. The good news is the higher
deposit insurance levels will help future deposit gathering and the fact that on a relative basis,
community banks will get hurt a whole lot less than banks over $10B and $50B.

At the end of July, we were able to gather a complete picture of 2Q numbers on bank
performance. In general, bank earnings improved largely driven by lower additional reserves.
Next to reserves, margins improved slightly amid a greater number of fixed rate loans added to
the portfolio and lower deposit costs (and higher volume). In sum, a stable 2Q has made banks
devote a small portion of resources away from credit quality and start to get back to the business
of building a franchise.

In other news, most European bank’s passed their stress test which was a strong point of relief to
global markets. Having the stress test behind combined with financial sector reform legislation
and revisions to Basel III, created a supportive market environment. This sentiment, combined
with low inflation and a high level of liquidity are making many banks broadly positive on the risk
outlook.

As we enter into the last full month of summer, August is starting off with a deciding bearish tone
largely driven a dour employment report. The loss of jobs, even discounting the planned Census
workers coming off the payrolls, is concerning. The private sector did add jobs in education,
healthcare and a few other areas, but losses from the government sector overwhelmed the
numbers. Revisions to past months also hurt the employment outlook. The end result is while job
growth should pick up, it is nowhere near the pace that is required to secure a stable recover and
bring the threat of inflation forward (which is what we really need right now).

Chris Nichols
President & CEO

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BANK ACTIVITY
Lending Activity

Banks continue to see limited lending opportunities for commercial customers. We see
underwriting standards becoming “more flexible” and spreads tightening. Given low rates, and a
flattening curve, we believe that net interest margins are more likely to continue to be under
pressure for the next year.

While loan demand remains muted, banks continue to aggressively poach customers from each
other – competing mostly on rate. Those banks that maintain good borrowers in floating-rate
loans, or fixed-rate loans without prepayment penalties must be mindful of losing those customers
or at the very least re-negotiating spreads.

Many bankers are telling us that they would be pleased if they remain flat on loans for the
remainder of the year, but for that to occur runoff must be stopped. We continue to sell loans to
banks interested in floating-rate, national C&I obligors with strong credit profiles. In addition, we
remain active at helping banks manage both credit and interest rate risk, through use of our
unique BLP program.

Ed Kofman
Managing Director - Derivatives Desk

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BANK ACTIVITY
Certificate of Deposit Issuance

July was a surprisingly busy month for CD issuance as we had a few larger banks come in and
gobble up some volume at these cheap levels. Most of the issuance was in the early part of the
month as things tapered off to close out July. Rates ended the month slightly cheaper throughout
the curve than where funds were trading to start the month.

Pressure from regulators, capitalization issues and the lack of loan demand has and continues to
keep the CD market quiet. As we always mention, these are the times for banks to be
opportunistic as funds are readily available to you at a low all in cost.

Looking ahead to August we anticipate the market to remain fairly quiet and issuance to be light
throughout the month. August has always been a historically quiet month and with the current
environment there is no evidence that this August will set the world on fire. So if you have some
upcoming maturities or a CD that you can call and re-issue please contact us to discuss your
options.

Don Saunders
Managing Director - Brokered CD's

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BANK ACTIVITY
Credit & Risk Management

Historical and current spreads vs. Treasuries for MBS and Agencies are listed below.

MBS Agencies
15Y 30Y 2Y 5Y 10Y 30Y
5YR High 312 238 182 159 175 168
5YR Low 72 57 -16 2 -5 28
5YR Avg 132 124 37 46 46 51

1YR High 143 105 31 50 47 52
1YR Low 97 56 -16 2 -5 28
1YR Avg 119 78 13 22 29 41

90 Day High 132 93 31 37 44 50
90 Day Low 106 57 9 6 19 28
90 Day Avg 118 75 19 18 33 28

30 Day High 126 82 14 33 31 45
30 Day Low 109 56 9 17 19 28
30 Day Avg 116 67 13 27 27 39

Last 116 56 10 18 18 28

Data Source: Bloomberg

Fixed Income: Investment activity moderated in July as Treasury yields continued to decline
(exception 30Y +10bp) and credit spreads tightened. The 2Y yield fell 5bp vs. the prior month and
reached an all time low (in the past 5Y) of 0.55% at month-end. The 5Y and 10Y yields dropped
14bp and 13bp respectively. The 30Y was the exception as noted above. The lingering European
debt crisis, weakness in the economic data releases and a downgraded assessment of the
economy by Fed Chairman Bernanke during his Congressional Testimony a few weeks ago all
contributed to the flight to quality. Agencies also performed well, aided by limited supply. Spreads
tightened by 3bp and 14bp in the 2Y and 5Y parts of the curve respectively; 10Y and 30Y
agencies also tightened by 13bp and 17bp respectively. MBS pass thrus posted gains as well
with 15Y spreads tightening 2bp and 30Y spreads snapped back 26bp, achieving the tightest
spread of +54bp (in the past 5Y) at month-end.

Bankers took advantage of the low yield levels and sold bonds to book gains and to improve
short-term performance. Investors focused on short duration CMOs, agency hybrid ARMS, 15Y
agency MBS and zero risk weighted GNMA paper saw greater demand.

Looking ahead, market participants and in particular those in the MBS sector, will keep a close
watch on the developments (or lack thereof) of a new government sponsored re-fi program which
creates uncertainty over future prepayment assumptions. Analysts estimate that the program
could free up approximately $45B in cashflow for U.S. consumers if eligible mortgages are
refinanced even if they don’t meet all the credit criteria. Balancing the need to reinvigorate a
sluggish economic recovery, concerns of the absorption of new (re-fi induced) mortgage supply
estimated at $2T+, the government stepping in to purchase excess supply and the tax bill for U.S.
citizens are a few of the many factors that may impede or thrust the implementation of the
program.

Maxine Lew
Director - Fixed Income

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BANK ACTIVITY
Credit & Risk Management

When evaluating this decade’s rate experience, we can see 3 times where market rates have
changed by at least 4 points (over a 2 year time horizon). Two of these changes have been to the
down side (falling rates) and we are now awaiting the uptick in market rates. As we can see from
history, this uptick has the potential to be in the range of 4+ points (over a 2 year time horizon).

Rolling 2 Year Change in Index
(July ‐ to ‐ July)

‐6.00 ‐4.00 ‐2.00 0.00 2.00 4.00 6.00

Fed Effective

5Y Swap

10Y Swap

2002 2003 2004 2005 2006 2007 2008 2009 2010

This uptick has the potential to impact bank earnings from three perspectives.

First on the funding side, banks will need to be diligent in holding the line on deposit pricing which
may prove difficult. Many banks are currently flush with customer excess liquidity and that excess
liquidity will tend to cycle out of the bank as alternative instrument options (non-bank) will become
more prevalent as rates start to rise.

Second on the loan side, earnings will be restrained by existing loan floors that are embedded in
adjustable and/or variable rate loans. Short-term market rates will need to move upwards by at
least 2 points to return these assets to an upward adjusting rate loan.

Third and most importantly, as rates rise (especially over the next 3 points), there will be a
significant and negative impact on rate risk assumed by individual borrowers. Unfortunately, as
rates rise (which is good for bank earnings as adjustable rate produce additional interest income)
credit quality will likely fall. Higher debt service payments (due to rising rates) will place additional
strain/stress on credit quality by increasing debt service on borrowers and forcing some
borrowers into default at a time where secondary sources of loan repayment (collateral) will still
be suffering from the lingering impact of declining collateral values, all of which will increase loan
losses.

Prudently managed banks will incorporate note level ALM results (derived from their up 3 & 4
point rate shocks) into their note level Loan Stress Testing models to determine both expected
levels of non-accrual loans as well as charge-offs/provisions associated with these loans. Once
the value of non-accrual loans and loss/provision has been determined, these values need to be
incorporated back into ALM models to determine the impact on; earnings, earnings sensitivity and
capital. If these integration steps are not incorporated into bank risk assessment processes, then
capital plans will be material distorted as significant amounts of risk will not be measured.

Doug Hensley
Managing Director
5 of 21

BANK ACTIVITY
Funding

The 2nd quarter preliminary numbers for banks at this point are only partial, but we are seeing a
trend which indicates the downward movement in the COF on interest bearing deposits may be
slowing. This could mean for some banks their deposit rates and mix have reached a point where
they can not lower their funding costs much more. For others, it could be an indication that more
work is needed. In which category does your bank fall?

In the samples of banks that we have been reviewing, the average change in the cost of funds on
interest bearing deposits was around 20 bps from December 2009 to March 2010. The partial
sample for the 2nd quarter shows the decline from March to June to be closer to 10 bps. Market
interest rates such as LIBOR and Fed Funds have remained relatively steady (incredibly low) for
most of 2010, but there have been significant changes in deposit pricing activity in most markets
as certain banks are resolved or adopt better pricing discipline – some by choice, some by force.
This moves the reference standard for all banks, and some have reacted better than others. One
cannot afford to fall asleep at the switch as banks once pricing in the bottom third of the market
may find themselves in the upper third if they are not careful about monitoring and adjusting their
deposit activity.

One of the processes banks have been going through has been to bring deposit costs from
earlier interest rate environments down to current market levels. Rates on non-maturity deposits
are typically the easiest and quickest to bring down. As of July 26, 2010, the FDIC national
average rate for $10k tier MMDAs was 29 bps with the +75 bps rate cap being 1.04%. Similarly,
the 12 month CD FDIC national average rate was 72 bps, with a rate cap of 1.47% for those
institutions subject to this pricing restriction. As shown by our monthly market analysis packages
for our Coach clients, most banks are pricing closer to the FDIC national rate averages than the
caps. Older CDs have typically worked their way through the maturity schedule, so current COF
performance is becoming more reflective of pricing and marketing activity of today rather than
that of the past.

Against this backdrop, it is important for banks to review their pricing and marketing activity to
ensure they are doing all they can to continue lowering their deposit costs. IF the national
average deposit rates are loosely 1.00% or less, how does your bank’s overall COF on interest
bearing deposits compare? A hint is only 20-30% of the banks in the US have deposit costs less
than 1.00%. We touched on one of the mistakes banks are making with their deposit activity in
last month’s funding commentary – there are plenty of other mistakes we have been seeing which
have caused certain banks to slow or even reverse the decline in their COFs. Fixing harmful
behavior is just as effective, if not more so, than coming up with the next “miracle” product or
marketing campaign.

Most banks are rather liquid currently and have significantly reduced their growth rates from prior
years. This is a perfect opportunity to take a closer look at your bank’s funding practices to
ensure that positive behaviors are being employed to maximize current profitability (lower funding
costs), and to position your bank for the future. If your bank had high or volatile funding costs in
the past, it will most likely do so again unless corrective steps are taken today. Strongly
performing banks need to work even harder today to ensure they are able to maintain and protect
their superior performance. In which category does your bank fall?

Greg Judge
Liability and Strategic Consulting

6 of 21

BANK ACTIVITY
Loan Pricing and Customer Profitability

With so much emphasis placed on loans and loan performance in the news, we would like to
dedicate this month’s commentary to the art of valuing deposits. Getting the right kind of deposit
customers is often the best way to maximize bank profits – especially in an environment where
pricing power regarding loans is limited. At BIG we recognized this, which lead us to combine a
much more robust deposit valuing methodology in the next iteration of our pricing model. The
loan pricing group and the relationship profitability group have now combined forces, as these
activities are truly inextricably linked.

Using predictive analytics to measure the expected life of a deposit relationship is very important.
Utilizing knowledge of the customer’s overall relationship with the bank in combination with recent
transaction activity, the bank can better predict the expected life of a particular deposit and in
turn, the profitability of that deposit.

At first blush, the following customers appear to have identical deposit relationships. In fact, all of
our competitors would agree, and value these deposit accounts the same:

Digging deeper however, we find that Account 1 is actually quite different from Account 2:

7 of 21

BANK ACTIVITY

Studies show that the more products a customer uses, the lower the likelihood they are to leave.
For example, if a customer only has a checking account at the bank, there is a 50% chance of
losing that customer in any given year. However, if that customer has a checking and savings
account, the probability drops to 10%. Those banks that can add a loan to the mix can push the
probability down to 2%. Knowing which customers to cross sell to, and with which products, plays
a huge roll in customer retention. The length of relationship, combined with other products and
services, result in a much more profitable customer. The deposit funds from Account 1 are a
much more stable (and predictable) source of funding than those from Account 2.

Probabilities of Default Month in Review

The average probability of default (PD) dropped 1.43% to 5.15% in July. Ag Farmland and Ag
Production PDs reached all time highs at 2.91% and 1.43%, respectively. However, these are still
the lowest PDs of the categories tracked and appear tame compared to Hotel's 11.02%. 6
categories hit annual highs while 5 are at yearly lows.

Kim Jackson
Managing Director

Mike Middleton
Managing Director

8 of 21

BANK ACTIVITY

Prime 2yrswap 5yrswap 10yr swap
3.25% 0.77% 1.79% 2.96%

Yields
Lending Class Prime 2yr 5yr 10yr
Ag - farm land 5.02% 5.40% 6.17% 6.59%
Ag - production 4.86% 5.24% 5.98% 6.39%
Construction -Commercial 6.12% 6.72%
Construction multifamily 6.12% 6.77%
Construction Residential 6.12% 6.87%
Construction Other 6.12% 7.02%
Consumer 5.02% 5.40% 6.17% 6.59%
Hotel 5.63% 6.07% 6.92% 7.40%
Industrial 5.07% 5.46% 6.23% 6.66%
Manufactured Housing 5.07% 5.46% 6.23% 6.66%
Mixed Use 5.07% 5.46% 6.23% 6.66%
Multifamily 5.12% 5.54% 6.31% 6.75%
Office 5.12% 5.52% 6.29% 6.73%
Retail 5.12% 5.52% 6.29% 6.73%
Self Storage 5.02% 5.40% 6.17% 6.59%
Other 5.12% 5.52% 6.29% 6.73%

Spreads
Lending Class Prime 2yr 5yr 10yr
Ag - farm land 1.77% 4.64% 4.37% 3.64%
Ag - production 1.61% 4.47% 4.19% 3.43%
Construction -Commercial 2.87% 5.95%
Construction multifamily 2.87% 6.00%
Construction Residential 2.87% 6.10%
Construction Other 2.87% 6.25%
Consumer 1.77% 4.64% 4.37% 3.64%
Hotel 2.38% 5.30% 5.13% 4.44%
Industrial 1.82% 4.69% 4.44% 3.70%
Manufactured Housing 1.82% 4.69% 4.44% 3.70%
Mixed Use 1.82% 4.69% 4.44% 3.70%
Multifamily 1.87% 4.77% 4.52% 3.79%
Office 1.87% 4.75% 4.50% 3.77%
Retail 1.87% 4.75% 4.50% 3.77%
Self Storage 1.77% 4.64% 4.37% 3.64%
Other 1.87% 4.75% 4.50% 3.77%

For information regarding our Loan Pricing Model or Customer Profitability Services, please
contact Kim Jackson, Mike Middleton or Janet Leung at 877-777-0412,
info@bancinvestment.com.

9 of 21

BANK ACTIVITY
BIG Metrics - 2Q Performance Summary

As of July 29th, nearly 5,500 banks had filed their 2Q call report and we’ve posted our free Early
Data dashboard at https://biganalytics.bancinvestment.com/ to help you spot trends in the
banking industry. We plan to have 2Q call report data for non-OTS banks this Monday, August
9th, so call or email to sign up for BIG Metrics and get a jump on the competition!

Michael Stinson
Vice President – BIG Metrics

10 of 21

Real Estate Market Trends - Special Report
2Q Briefing
The 2Q noted the season of records and for the most part was of the unpleasant kind. Employment continued to wane,
ending the quarter at 9.5%. Although down from a 10.1% high last fall, any improvement in conditions will take some
time to ripple through office and retail properties. As for multifamily real estate, the pickup has begun.

For multifamily properties, the national average vacancy rate dropped for the first time in 3Y, falling 20bp to 7.8% as
demand made a larger turn. Net absorption topped 46k units, marking the largest quarterly gain in occupied space in
10Y. 70% of this change came from existing properties as asking rents averaged 15% more for newly completed
spaces. Over 29k units came online over the quarter, of which 57% remained vacant. Overall, rents were up a second
consecutive quarter, rising 70bp following a 30bp rise in the 1Q. 67of 82 markets experienced a rise in rents with just as
many seeing an increase in occupancy. With the 2Q and 3Q typically running as stronger seasons, the 3Q should at
least be stable. With employment on the stop and go, the recovery may be muted.

Office occupied stock dropped for a 10th straight quarter with net absorption wading in the negatives, pushing vacancies
up 10bp to 17.4%, a 17Y high. Over the last 12 months, vacancies rose 140bp and since the cycle low in 3Q07, 490bp.
Helpfully, construction has remained low, adding only 7.6mm sq. ft over the quarter. If employment does not take
another turn for the worse, recovery may begin in the 2H of this year. Rents dropped an average 80bp, with 65 of 82
markets experiencing a fall (up from 54/82 in the 1Q). Vacancies rose in 49 of 82 regions.

Construction completions tightened further for neighborhood and community shopping centers, with only 355mm sq. ft.
coming online in the 2Q. However, this supply change did little, as demand languishes. As net absorption remained in
the negative (-2.2mm sq. ft) for the 10th straight quarter, vacancy rates inched another 10bp to 10.9% with rents falling
another 50bp. Deterioration is slowing, helping alleviate some pressure from landlords. Vacancies jumped in 31 of 80
markets with rents falling in 67. As for regional and super regional malls, vacancies rose 10bp to 9.0%, noting the 7th
straight quarter of vacancies surpassing record highs. Not coincidently, asking rents dropped for a 7th consecutive
quarter, down 20bp.

Retail sales, less gas and auto, dropped 0.8% in May, and picked up a slight 0.1% in June. Until these figures begin
trucking along, performance remains meager. Expectations on recovery are projected for late 2012.

11 of 21

INTEREST RATE RECAP
07/30/10 06/30/10 05/28/10 07/31/09
SHORT RATES Now Prior Change Q1 Change YoY Change
Fed Funds 0.25% 0.25% 0.00% 0.25% 0.00% 0.25% 0.00%
Prime 3.25% 3.25% 0.00% 3.25% 0.00% 3.25% 0.00%
1M Libor 0.31% 0.35% -0.04% 0.25% 0.06% 0.28% 0.03%
2M Libor 0.37% 0.43% -0.06% 0.27% 0.10% 0.33% 0.04%
3M Libor 0.45% 0.53% -0.08% 0.29% 0.16% 0.48% -0.03%
4M Libor 0.52% 0.60% -0.08% 0.33% 0.19% 0.64% -0.12%
5M Libor 0.59% 0.67% -0.08% 0.37% 0.22% 0.82% -0.23%
6M Libor 0.67% 0.75% -0.08% 0.44% 0.23% 0.93% -0.26%
1Y Libor 1.04% 1.17% -0.13% 0.92% 0.12% 1.50% -0.46%

TREASURY RATES
2Y Note 0.55% 0.61% -0.06% 1.02% -0.47% 1.11% -0.57%
3Y Note 0.82% 0.97% -0.14% 1.57% -0.75% 1.59% -0.76%
4Y Note 1.20% 1.43% -0.23% 2.13% -0.93% 2.04% -0.84%
5Y Note 1.60% 1.78% -0.18% 2.55% -0.95% 2.51% -0.92%
7Y Note 2.30% 2.41% -0.11% 3.28% -0.98% 3.14% -0.84%
10Y Note 2.91% 2.93% -0.03% 3.83% -0.93% 3.48% -0.58%
30Y Bond 3.99% 3.89% 0.10% 4.71% -0.72% 4.30% -0.31%

SWAPS FIX VS. 3M LIBOR
2Y Swap 0.73% 0.97% -0.24% 1.19% -0.46% 1.47% -0.73%
3Y Swap 1.07% 1.33% -0.26% 1.81% -0.74% 2.08% -1.01%
4Y Swap 1.43% 1.71% -0.28% 2.31% -0.88% 2.54% -1.11%
5Y Swap 1.78% 2.05% -0.27% 2.73% -0.95% 2.87% -1.09%
7Y Swap 2.36% 2.56% -0.20% 3.32% -0.96% 3.36% -0.99%
10Y Swap 2.89% 3.00% -0.11% 3.82% -0.93% 3.73% -0.83%
15Y Swap 3.37% 3.42% -0.05% 4.26% -0.89% 4.02% -0.65%

Month to Month Treasury Yield Change

0.15%
0.10%

0.05%
-0.03%

-0.05%
-0.06%
-0.11%

-0.15%
-0.14%
-0.23% -0.18%
-0.25%
2Y Note 3Y Note 4Y Note 5Y Note 7Y Note 10Y Note 30Y Bond

12 of 21

PROJECTED FEDERAL FUNDS
Survey Date: 7/8/2010
Dealer Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011
Action Economics 0.25% 0.25% 0.25% 0.75% 1.25% 1.75%
Barclays Capital * 0.25% 0.25% 0.25% 0.75% 1.25% 1.75%
BMO Financial 0.25% 0.25% 0.25% 0.25% 0.50% 1.00%
BNP Paribas* n/a n/a n/a n/a n/a 0.25%
Commerzbank AG 0.25% 0.25% 0.75% 1.25% 1.75% n/a
Credit Suisse FB * 0.25% 0.25% 0.50% 1.00% 1.25% 1.50%
Deutsche Bank * 0.25% 0.25% 0.50% 1.00% n/a n/a
Fannie Mae 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
First Trust Adv. 0.25% 0.25% 0.25% 0.75% 1.25% 1.75%
HSBC* 0.25% 0.25% 0.25% 0.25% 0.50% 1.00%
Janney Montgomery 0.25% 0.25% 0.25% 0.50% 1.00% 1.25%
JP Morgan Chase * 0.25% 0.25% 0.25% 0.25% n/a n/a
Mizuho Securities 0.25% 0.25% 0.25% 0.25% 0.50% n/a
Moodys Capital Markets 0.25% 0.25% 0.50% 1.00% 1.50% 1.75%
Morgan Keegan 0.25% 0.25% 0.25% 0.25% 1.00% 1.50%
Morgan Stanley * 0.25% 0.25% 0.50% 1.00% 1.75% 1.75%
Natixis 0.25% 0.25% 0.25% 0.75% 1.00% 1.50%
Nomura Securities* 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Scotia Capital 0.25% 0.25% 0.25% 0.75% 1.25% 1.75%
Societe Generale 0.25% 0.25% 0.25% 0.50% 1.25% 2.00%
Standard Chartered 0.25% 0.25% 0.25% 0.25% 0.75% n/a
State Street Global 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
UBS* 0.25% 0.25% n/a n/a n/a n/a
Wells Fargo & Co 0.25% 0.25% 0.25% 0.25% 0.50% 1.00%

Median 0.25% 0.25% 0.25% 0.50% 1.00% 1.50%

Average 0.25% 0.25% 0.32% 0.57% 0.95% 1.24%

High 0.25% 0.25% 0.75% 1.25% 1.75% 2.00%

Low 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%

*Primary Dealers

13 of 21

SHORT TERM MARKET EXPECTATIONS
FEDERAL FUNDS FUTURES
Federal Funds Futures
Aug-10 0.25
Sep-10 0.25 1.00

Oct-10 0.25
Nov-10 0.25 0.75

Dec-10 0.25
Jan-11 0.25 0.50
Feb-11 0.25
Mar-11 0.25 0.25
0.25 0.25 0.25 0.25
Apr-11 0.25
May-11 0.25 0.00

May-11
Nov-10

Mar-11
Aug-10

Sep-10

Oct-10

Dec-10

Jan-11

Feb-11

Apr-11

Jun-11
Jun-11 0.25

EURODOLLAR FUTURES

Sep-10 0.41 Eurodollar Futures
Dec-10 0.45 2.30
2.15
Mar-11 0.51
Jun-11 0.63 1.80
Sep-11 0.78 1.76
Dec-11 0.97 1.30
Mar-12 1.16 1.16
Jun-12 1.36 0.80
Sep-12 1.55 0.41
0.63
Dec-12 1.76
0.30
Mar-13 1.94
Mar-11

Mar-12

Mar-13
Sep-10

Dec-10

Jun-11

Sep-11

Dec-11

Jun-12

Sep-12

Dec-12

Jun-13
Jun-13 2.15

PRIME RATE FUTURES

Sep-10 3.11 Prime Rate Futures

Dec-10 3.15 5.05
Mar-11 3.21 4.85

Jun-11 3.33 4.55
4.46
Sep-11 3.48
Dec-11 3.67 4.05
3.86
Mar-12 3.86
3.55
Jun-12 4.06
Sep-12 4.25 3.11 3.33
3.05
Dec-12 4.46
Mar-11

Mar-12

Mar-13
Sep-10

Dec-10

Jun-11

Sep-11

Dec-11

Jun-12

Sep-12

Dec-12

Jun-13

Mar-13 4.64
Jun-13 4.85

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LONG TERM MARKET EXPECTATIONS
TREASURIES NOW as of 7/31/2010

Current Treasury Curve
1YR 0.28
2YR 0.55 3.30
3.20
3YR 0.83 2.91
5YR 1.60
2.45
10YR 2.91
1.60
1.70

0.95
0.83

0.28 0.55
0.20
1YR 2YR 3YR 5YR 10YR

TREASURIES 1Y FORWARD as of 7/31/2010

1YR 0.83 1Y Forward vs. Now
2YR 1.10
3YR 1.53 3.25
3.23
5YR 2.29 2.91
10YR 3.23 2.50
2.29

1.75

1.10 1.53 1.60
1.00
0.83
0.83
0.28 0.55
0.25

TREASURIES 2Y FORWARD as of 7/31/2010

2Y Forward vs. Now
1YR 1.38
2YR 1.88 3.60
3.51
3YR 2.30
3.01
5YR 3.01 2.91
2.75
10YR 3.51
2.30
1.90
1.88
1.38 1.60
1.05
0.55
0.83
0.28
0.20

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OTHER IMPORTANT DATA
LIBOR MARKET EXPECTATIONS
LIBOR 6M Forward 0.53 0.83 1.18 1.95 3.17
LIBOR 1Y Forward 0.84 1.13 1.55 2.32 3.35
LIBOR 2Y Forward 1.43 1.92 2.34 3.07 3.69

LIBOR 6M Forward
LIBOR 1Y Forward 2Y Forward vs. 1Y Forward vs. 6M Forward

LIBOR 2Y Forward
4.00
3.69
3.35
3.25
3.17

2.50

2.34

1.75
1.43 1.55
1.18
1.00
0.84
0.53
0.25

BALTIC DRY INDEX - 1 YEAR HISTORY

Last Price 1967
High 11/19/09 4661
Average 3004
Low 7/15/10 1700

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OIL PRICES (INFLATION) - 5 YEAR HISTORY

Last Price 78.95
High 7/03/08 145.29
Average 74.39
Low 12/19/08 33.87

UNEMPLOYMENT RATE (JOBS PICTURE) - 5 YEAR HISTORY

Last Price 9.5
High 10/31/09 10.1
Average 6.3
Low 10/31/06 4.4

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GDP (UNDERLYING ECONOMIC GROWTH) - 5Y HISTORY

Last Price 2.4
High 3/31/08 5.4
Average 1.1
Low 12/31/08 -6.8

1 MONTH LIBOR (APPROX. BANK FUNDING COSTS) - 5Y HISTORY

Ask price 0.30500
High 9/07/07 5.82375
Average 3.03883
Low 3/01/10 0.22813

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BOND YIELD FORECAST
Market Yield Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011
US 3 M Libor 0.45 0.53 0.63 0.78 1.10 1.53

US 3M Libor
1.75
1.53
1.40
1.10
1.05

0.70
0.63
0.45
0.35

Fed Funds Target 0.25 0.25 0.25 0.25 0.75 1.00

Fed Funds Rate

1.25

1.00
1.00
0.75
0.75

0.50
0.25 0.25
0.25

US 10Y 2.91 3.19 3.29 3.48 3.64 3.91
US 2Y 0.55 0.83 1.01 1.25 1.56 1.93
spread 2.36 2.36 2.28 2.23 2.08 1.98

US 10Y
10Y VS 2Y US 2Y

4.50

3.91
3.19
3.50
3.48
2.91
2.50
1.93
1.50
1.56
0.55 1.01
0.50

19 of 21

KEY UPCOMING DATES
FOMC MEETING DATES FOMC VOTING MEMBERS
01/28/09 0.00- 0.25% Risk to Growth 1 Ben Bernanke (Chairman)
03/18/09 0.00- 0.25% Risk to Growth 2 James Bullard
04/29/09 0.00- 0.25% Risk to Growth 3 William Dudley
06/24/09 0.00- 0.25% Risk to Growth 4 Elizabeth Duke
08/12/09 0.00- 0.25% Risk to Growth 5 Thomas Hoenig
09/23/09 0.00- 0.25% Risk to Growth 6 Donald Kohn
11/04/09 0.00- 0.25% Risk to Growth 7 Sandra Pianalto
12/16/09 0.00- 0.25% Risk to Growth 8 Eric Rosengren
01/27/10 0.00- 0.25% Risk to Growth 9 Daniel Tarullo
03/16/10 0.00- 0.25% Risk to Growth 10 Kevin Warsh
04/29/10 0.00- 0.25% Risk to Growth
06/24/10 0.00- 0.25% Risk to Growth FOMC ALTERNATE MEMBERS
08/12/10 1 Christine Cumming
09/23/10 2 Charles Evans
11/04/10 3 Richard Fisher
12/16/10 4 Narayana Kocherlakota
01/26/11 5 Charles Plosser

KEY UPCOMING ECONOMIC DATA

Date Indicator Date Indicator
8/2/2010 Construction Spending MoM 8/17/2010 Capacity Utilization
8/2/2010 ISM Manufacturing & Prices Paid 8/17/2010 Building Permits & Housing Starts
8/3/2010 Vehicle Sales 8/19/2010 Leading Indicators
8/3/2010 Pending Home Sales 8/23/2010 Chicago Fed Nat Activity Index
8/6/2010 Employment Report 8/24/2010 Richmond Fed Manufact. Index
8/6/2010 Consumer Credit 8/24/2010 Existing Home Sales
8/10/2010 Wholesale Inventories 8/25/2010 House Price Index
8/11/2010 Monthly Budget Statement 8/25/2010 New Home Sales
8/11/2010 Trade Balance 8/25/2010 Durable Goods Orders
8/12/2010 Import Price Index 8/27/2010 GDP Price Index
8/13/2010 Business Inventories 8/27/2010 Core PCE QoQ
8/13/2010 Advance Retail Sales 8/27/2010 U. of Michigan Confidence
8/13/2010 Consumer Price Index 8/30/2010 Personal Consumption
8/16/2010 Empire Manufacturing 8/31/2010 Consumer Confidence
8/16/2010 NAHB Housing Market Index 8/31/2010 S&P/ Case Shiller Home Price Ind
8/17/2010 Producer Price Index 8/31/2010 Chicago Purchasing Manager
8/17/2010 Industrial Production 8/31/2010 NAPM-Milwaukee

20 of 21

DISCLAIMER

The information contained in this document is privileged and confidential. If the reader of this message is
not involved in trading or financial service activities, or responsible for delivering this message to the
intended recipient, you are hereby notified that any distribution or copying of this communication is strictly
prohibited. If you have received this communication in error, please notify the Banc Investment Group
immediately at 877-777-0412. This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and solicitations of offers to buy
the securities are made only by, and this information must be read in conjunction with, the final
Prospectus Supplement and the related Prospectus or, if not registered under the securities laws, the
final Offering Memorandum (the “Offering Document”). Information contained herein does not purport to
be complete and is subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and representations and other
precautionary matters, as disclosed in the Offering Document. This information may include certain
assumptions and no representation is made that it is accurate or complete or that any returns indicated
will be achieved. Changes to assumptions may have a material impact on returns. Past performance is
not indicative of future results. Price and availability are subject to change without notice. Past
performance is no guarantee of future results. Investment return and principal value of mutual fund
investments may fluctuate so that investor’s shares, when redeemed, may be worth more or less than
their original cost. Mutual funds are not FDIC insured, not bank guaranteed and may lose value.
Customers should rely on their own outside counsel, regulator, or accounting firm to address specific
circumstances. Additional information is available on request. Banc Investment Group is a member of
FINRA and SIPC, and the sister company of Pacific Coast Bankers' Bank. This document cannot be
reproduced or redistributed outside of your institution without the written consent of the Banc Investment
Group. Banc Investment Group is the sister company of PCBB, and all securities are offer through BIG.

Source for data is Bloomberg, dealer provided documents and proprietary calculations or research. This
package is created specifically for independent banks as an added monthly service and provided by
Steve Brown, Chris Nichols and the rest of the team at Banc Investment Group.

340 Pine Street, Suite 401, San Francisco, CA 94104
ph. 877-777-0412

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